Impact of Saudi, Others Blockage on Qatari Economy

Saudi Arabia has severed all land, sea and air links with Qatar, the UAE has closed its airports and harbours to Qatari flights and shipping and Egypt is also taking part in a blockade which will disrupt  Qatari economy, trade flows and passenger flights even as the state says the claims are ‘unjustified’ and ‘baseless.’ This actions will lead to economic crisis for the country of 2.6 million residents, that it is said to be punching above its strategic weight.

This has led to a severe diplomatic row that has broken out between Qatar and countries in the Middle East taking part in a blockade which is expected to disrupt trade flows and passenger flights.

Even flights from and to the peninsular Gulf state have been cancelled. Qatar’s critics, with Saudi Arabia in the lead, allege the Qataris were siding with arch-enemy Iran, supporting militants and accommodating Muslim Brothers.

Though Qatar is one of the wealthiest countries in the world, it relies heavily on imported food from Saudi Arabia, UAE among other places. The country imported about $1 billion worth of foodstuff in 2015, with about a third of that coming from Saudi Arabia and the UAE, according to the World Bank data.

“Food security is a big issue here in Qatar,” CNN quoted Adel Abdel Ghafar, visiting fellow at the Brookings Doha Center, as saying.

“So the closing of air and land crossing has implications for the food supply chain,” he added.

“If this dispute goes on for a while, the ramifications could be huge,” said an international banker based in the Gulf, declining to be named because of political sensitivities.

“Asset managers will not differentiate between Qatar and the rest of the GCC, and international managers will take their hands off any credit from the GCC. If Qatar is seen as a terror financing or compliance issue, then asset managers will be cautious.”

Saudi Arabia, the UAE and Bahrain withdrew their ambassadors from Qatar for eight months in 2014, but that had minimal market or economic impact because it did not involve a ban on transport links.

The United States, who have military installations in Qatar, are Qatars most important import partner. Most exports go to South Korea. The UAE are on the top five list for imports and exports.

Every blue-chip share on the Qatar stock market has fallen sharply this morning. Many stocks – including property and energy companies – have slumped by 10%, which is the maximum daily move allowed by regulators.

Even the best-performing stock on the QSI index is down 6%, as investors are spooked by the sudden freeze in relations with other Gulf states.

The Qatar index is currently down by 7.5%, hitting its worst level since early 2016. Reuters reported that some Egyptian banks have suspended links with their counterparts in Qatar.

It will damage the prospects of a recovery for Doha’s national carrier, Qatar Airways, amid a slowdown caused by the US administration’s ban on electronic devices in the cabins of aircraft flying from the Middle East, and will raise questions about the future of al-Jazeera, the flagship television network established by the Gulf kingdom and which has been at the centre of diplomatic rows with the rest of the region.

Along with the block on re-exports from Dubai to Qatar, together the measures could even affect the monarchy’s preparations for the football World Cup it is due to host in 2022.

Al-Jazeera was already blocked in several Arab countries. The channel was praised for its coverage of the initial months of the Arab uprisings in 2011, but since then it has been transformed in the minds of many in the region into a tool for furthering Qatari foreign policy and promoting the views of Islamist groups that the monarchy has backed in recent years, including Egypt’s Muslim Brotherhood.

In 2014 the Gulf states withdrew their ambassadors from Qatar in a months-long diplomatic crisis, and one of the concessions offered by Doha was the closure of al-Jazeera Mubashir, a channel dedicated to propagating Muslim Brotherhood views about the 2013 coup in Egypt. Analysts suspect further curbs may be imposed on al-Jazeera this time around.

Iran, however, is prepared to ship food to Qatar through its three ports in the south of the country, Fars, a semi-official Iranian news agency, said.

This is not the First Time

This may end up snowballing into something bigger than in 2014, when Saudi Arabia, UAE and Bahrain temporarily withdrew their ambassadors from Qatar. That dispute centered on Egypt, where Qatar had supported a Muslim Brotherhood government while the Saudis and UAE bankrolled its army-led overthrow. Qatar also hosts Hamas’s exiled leadership as well as Taliban officials. Analysts say Saudi and its allies want to show Qatar, a country of 2.6 million residents, that it is punching above its strategic weight.

The move bans citizens from Saudi, Egypt, Bahrain, the United Arab Emirates, Libya and Yemen from travelling to Qatar, living there or passing through it, according to the Saudi government. People have 14 days to leave. Qataris will have the same amount of time to get out of Saudi Arabia, the UAE and Bahrain.